Good May Be Practical But Is It Good Enough? James Hansen Pitches Fee-and-Dividend Carbon Pricing

With Climate Week NYC drawing to a close (there's still the global Moving Planet action, organized by 350.org, on Saturday though...) I headed over to the New School to hear Dr James Hansen from NASA's Goddard Institute for Space Studies make his case for a fee-and-dividend approach to pricing carbon as the best policy. Hansen's been attempting to convince people of this for a while now, and TreeHugger has covered it a number of times, so I pretty much knew what I was getting into. But having never seen Hansen give the pitch in person, I was hoping to catch something new. Which there was, but let's set the stage first a bit more.

Presented as a contrast to Hansen was Arthur Runge-Metzger from the EU Commission, who spoke about the EU experience with carbon trading. The contrast was a bit forced, even though the EU is implementing a carbon pricing policy that Hansen has been quite vocal in opposing, because the two men actually agreed on more points than not. Or at least any disagreements were presented in a tremendously collegial way.

But onto fee-and-dividend.

For those just coming to Hansen's preferred way of pricing carbon, his fee-and-dividend approach would collect a tax on all fossil fuels at the first point of entry into the market, be that a physical port of entry into the nation in the case of imported fossil fuels or at the point of extraction for domestic fossil fuels. This would cover all oil, natural gas, and coal.

The fee collected is specified up front and would rise at predictable rates, so as all parties can better plan for this. Volatility and unpredictability in policy is no better in pricing carbon than it is in supporting renewable energy. Hansen says this will ensure that "no Wall Street millionaires" will be created "at public expense"--as he believes is inevitable with cap-and-trade systems and no good thing.

As for what technologies would replace carbon-intensive ones, Hansen is vehement that the market should choose the winners. Under this approach these will be the ones that are most efficient and provided the largest carbon reductions, Hansen says.

That's just the fee part. The dividend part is that the money collected under the program would be distributed back to the people of the United States. This would amount to, Hansen explains, for about $2000-3000 a year for every legal resident of the nation.

As I said, Hansen's been pushing this approach for a while. Back in 2009, when it appeared, if only fleetingly, that the US might have a glimmer of a chance of enacting a national cap-and-trade program, Hansen said he hoped the effort failed--something which drew ridicule from most of the green political punditry.

The hackneyed, canned, shut-it-down reply "don't let the perfect be the enemy of the good" was repeatedly uttered.

After Hansen's talk, during the Q & A portion of the presentation with Arthur Runge-Metzger, the phrase was uttered again. This time, not in response to Hansen's plea for fee-and-dividend though. (Note, I'm not just being flowery in calling it a plea; at times Hansen's frustration with cap-and-trade, just "designed for banks and fossil fuel interests", couldn't be held back and words failed him for a few moments.)

Rather, perfect being the enemy was cited by Runge-Metzger in defending the EU approach to carbon pricing and emissions reductions. He admitted that there's perhaps an abstractly more elegant or more efficient procedure of combatting climate change than the combination of the EU Emissions Trading Scheme, national level targets for emissions not covered by the federal plan, and the whole host of other ways the EU is taking action, but that at a level of practical policy, this good policy (it is providing positive results, broadly, it must be said) is as good as could be done.

Sidenote: For those not up on the intricacies of EU policy making, Runge-Metzger reminded the room that the main reasons the EU doesn't have a straight carbon tax is that for an EU-wide tax to be implemented it would require consensus among the member states. That could not be reached. However, for carbon trading only a majority vote was needed, and that obviously could be achieved.

To all this, Hansen raised what seems to me to be the crucial question, and probably should be the stock reply to anyone who trots on comparing the perfect versus the good. That question: (paraphrasing) is the good we're talking about good enough, will that good achieve the goal it's intended to achieve?

Many times the answer may well be yes. Other times perhaps not.

Hansen clearly believes, at least where the US is concerned (as I noted he was quite diplomatic in his discussion with Runge-Metzger and didn't directly criticize the EU approach) that if the so-called good method of carbon pricing being proposed is cap-and-trade then it is clearly not good enough, full stop. As Hansen sees it, there is zero chance of developing a global cap-and-trade system, one that will make deep enough reductions in emissions quickly enough.

Even though China has indicated it's willingly to given cap-and-trade a shot in a limited way domestically and has made impressive investments in renewable energy--both things signs of hope and optimism in Hansen's eyes (and this authors...)--Hansen believes there's little change of getting China and India to agree to get involved with a global cap-and-trade system.

However, a fee-and-dividend approach may be possible globally, Hansen says. In his example, even if the US is reluctant, if in some way the EU and China could agree to one, through global trade law, then other nations would eventually be forced to go along as well.

Runge-Metzer was clearly skeptical that would be possible, even if only non-verbally, but body language is telling.

But when (to use Hansen's terminology, accurate I believe) we're facing a situation of "intergenerational justice" such as climate change, and when we're facing a situation, particularly in the United States, where lobbyists for the polluting class of corporations are firmly in control of the government, more than ever we must ensure that the inevitable process of political compromise results in the "good" result being genuinely good enough.